Publication 575 - Pension And Annuity Income - 2002 Page 24
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347) The cost of life insurance coverage.
Rollovers
In addition, a distribution to the plan participant’s benefi-
ciary generally is not treated as an eligible rollover distribu-
If you withdraw cash or other assets from a qualified
tion. However, see Qualified domestic relations order and
retirement plan in an eligible rollover distribution, you can
Rollover by surviving spouse, later.
defer tax on the distribution by rolling it over to another
qualified retirement plan or a traditional IRA. You do not
Rollover of nontaxable amounts. You may be able to
include the amount rolled over in your income until you
roll over the nontaxable part of a distribution (such as your
receive it in a distribution from the recipient plan or IRA
after-tax contributions) made to another qualified retire-
without rolling over that distribution. (For information about
ment plan or traditional IRA. The transfer must be made
rollovers from traditional IRAs, see chapter 1 of Publication
either through a direct rollover to a qualified plan that
590.)
separately accounts for the taxable and nontaxable parts
of the rollover or through a rollover to a traditional IRA.
If you roll over the distribution to a traditional IRA, you
cannot deduct the amount rolled over as an IRA contribu-
If you roll over only part of a distribution that includes
tion. When you later withdraw it from the IRA, you cannot
both taxable and nontaxable amounts, the amount you roll
use the optional methods discussed earlier under
over is treated as coming first from the taxable part of the
distribution.
Lump-Sum Distributions to figure the tax.
Self-employed individuals are generally treated as em-
Withholding requirements. If an eligible rollover distri-
ployees for the rules on the tax treatment of distributions,
bution is paid to you, the payer must withhold 20% of it.
including the rules for rollovers.
This applies even if you plan to roll over the distribution to
another qualified retirement plan or to an IRA. However,
Qualified retirement plan. For this purpose, the following
you can avoid withholding by choosing the direct rollover
plans are qualified retirement plans.
option, discussed later. Also, see Choosing the right op-
•
A qualified employee plan.
tion at the end of this discussion.
•
A qualified employee annuity.
Exceptions. An eligible rollover distribution is not sub-
•
ject to withholding to the extent it consists of net unrealized
A tax-sheltered annuity plan (403(b) plan).
appreciation from employer securities that can be ex-
•
An eligible state or local government section 457
cluded from your gross income. (For a discussion of the tax
deferred compensation plan.
treatment of a distribution of employer securities, see Fig-
uring the Taxable Amount under Taxation of Nonperiodic
Payments, earlier.)
Eligible rollover distribution. An eligible rollover distri-
In addition, withholding from an eligible rollover distribu-
bution is any distribution of all or any part of the balance to
tion paid to you is not required if:
your credit in a qualified retirement plan except:
•
The distribution and all previous eligible rollover dis-
1) Any of a series of substantially equal distributions
tributions you received during the tax year from the
paid at least once a year over:
same plan (or, at the payer’s option, from all your
employer’s plans) total less than $200, or
a) Your lifetime or life expectancy,
•
The distribution consists solely of employer securi-
b) The joint lives or life expectancies of you and your
ties, plus cash of $200 or less in lieu of fractional
beneficiary, or
shares.
c) A period of 10 years or more,
Direct rollover option. You can choose to have any part
2) A required minimum distribution (discussed later
or all of an eligible rollover distribution paid directly to
under Tax on Excess Accumulation),
another qualified retirement plan that accepts rollover dis-
3) Hardship distributions,
tributions or to a traditional IRA.
4) Corrective distributions of excess contributions or ex-
No tax withheld. If you choose the direct rollover op-
cess deferrals, and any income allocable to the ex-
tion, no tax will be withheld from any part of the distribution
cess, or of excess annual additions and any
that is directly paid to the trustee of the other plan. If any
allocable gains (see Corrective distributions of ex-
part of the eligible rollover distribution is paid to you, the
cess plan contributions, at the beginning of Taxation
payer must generally withhold 20% of it for income tax.
of Nonperiodic Payments, earlier),
Payment to you option. If an eligible rollover distribution
5) A loan treated as a distribution because it does not
is paid to you, 20% generally will be withheld for income
satisfy certain requirements either when made or
tax. However, the full amount is treated as distributed to
later (such as upon default), unless the participant’s
you even though you actually receive only 80%. You gen-
accrued benefits are reduced (offset) to repay the
erally must include in income any part (including the part
loan (see Loans Treated as Distributions, earlier),
withheld) that you do not roll over within 60 days to another
6) Dividends on employer securities, and
qualified retirement plan or to a traditional IRA.
Page 24
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